Business ideas
8 min read

How to Start a Profitable Coffee Subscription Business [11 Steps]

Learn how to start a successful coffee subscription business with our 11+ step guide. Discover the best practices, tips, and tricks to grow your business.
Nick

By Nick Cotter
Updated Feb 05, 2024

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This page may feature products from our affiliate partners, which could influence the products we discuss due to potential compensation. Despite this, our evaluations are impartial, based solely on our independent analysis. The content here is intended for informational purposes and should not be seen as legal advice. For professional guidance, consulting with a legal expert is recommended.
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1. Perform market analysis.

Launching a coffee subscription business requires a thorough understanding of the market landscape. An in-depth market analysis helps to identify potential customers, understand competitors, and discover market trends. Consider the following key factors:

  • Customer Demographics: Analyze the age, income level, coffee consumption habits, and preferences of your target audience.
  • Market Trends: Research current trends in the coffee industry, such as the rise of specialty coffee or the demand for sustainable and ethically sourced beans.
  • Competition: Identify existing coffee subscription services and analyze their offerings, pricing models, and customer reviews to find gaps in the market.
  • Supplier Landscape: Investigate potential suppliers, their product quality, sourcing practices, and the possibility of forming partnerships.
  • Regulatory Factors: Understand the regulations and certifications relevant to the coffee industry and subscription-based businesses.
  • Price Sensitivity: Assess how price changes might affect consumer choices and subscription retention rates.
  • SWOT Analysis: Conduct a Strengths, Weaknesses, Opportunities, and Threats analysis to evaluate the competitive position of your business concept.
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Are Coffee Subscription businesses profitable?

Yes, coffee subscription businesses can be profitable. Successful subscription businesses typically have a loyal customer base, a unique product or service, and a well-defined pricing and delivery model. Additionally, they often offer exclusive discounts or rewards to loyal customers to encourage repeat purchases.

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2. Draft a coffee subscription business plan.

Starting a coffee subscription business requires careful planning and a clear vision of your target market, product offerings, and logistical operations. A well-crafted business plan is the blueprint for success, guiding you through the initial setup and long-term growth. Here are the essential elements to consider:

  • Executive Summary: Briefly outline your business concept, mission statement, and the unique selling proposition of your coffee subscription service.
  • Market Analysis: Research the coffee industry, identify your target market, and analyze competitors to find your niche.
  • Product Line: Define the types of coffee and subscription plans you will offer, including sourcing, pricing, and packaging options.
  • Marketing Strategy: Develop a plan for reaching your audience, including branding, advertising, promotions, and social media outreach.
  • Operations Plan: Outline the logistics of your subscription service, detailing the order fulfillment process, supply chain management, and customer service protocols.
  • Financial Projections: Provide an estimate of startup costs, pricing strategy, revenue forecasts, and break-even analysis to ensure financial viability.
  • Risk Assessment: Identify potential risks and outline strategies for mitigation to prepare for uncertainties in the business environment.

How does a Coffee Subscription business make money?

A coffee subscription business makes money by charging customers a monthly fee for regular delivery of coffee beans, packaged coffee, or other coffee-related items. Depending on the subscription model, customers may also pay an additional fee for each shipment or a flat rate for the entire subscription. Some businesses may also offer additional products or services, such as coffee brewing equipment or educational materials, that customers can purchase at an additional cost.

3. Develop a coffee subscription brand.

Developing a coffee subscription brand is a crucial step in creating a unique identity that resonates with your target audience. It's about crafting a compelling story and visual identity that distinguishes your coffee experience from the rest. Here are some key considerations to guide you in building your brand:

  • Define your brand's mission and vision to establish the core values and direction of your coffee subscription service.
  • Identify your target audience and understand their preferences, habits, and desires to tailor your brand to their needs.
  • Create a memorable brand name and logo that reflects the essence of your coffee and appeals to your customers.
  • Develop a consistent brand voice and personality that will be expressed across all marketing materials and customer interactions.
  • Choose a color scheme and design elements that evoke the emotions and ambiance you want associated with your brand.
  • Consider sustainable and ethical sourcing as part of your brand ethos to attract environmentally-conscious consumers.
  • Invest in quality packaging that not only preserves the freshness of your coffee but also aligns with your brand's aesthetic.
  • Build an online presence with a professional website and active social media accounts to connect with your audience.

How to come up with a name for your Coffee Subscription business?

Coming up with a name for your coffee subscription business is an important part of building your brand. Consider a name that is catchy and descriptive, such as 'Coffee Time Express' or 'Coffee Rush'. Think of words that represent both the quality of your coffee and the convenience of a subscription service. Also, make sure to check that the name is not already taken and that it doesn't infringe on any trademarks. Doing this research upfront will save you time and money in the long run.

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4. Formalize your business registration.

Once you've laid the foundation for your coffee subscription business, formalizing your business registration is a critical step to ensure your operation is legal and legitimate. This involves several key actions that will vary depending on your location, the type of business entity you're establishing, and the specific regulations of your industry. Below are the general steps you'll need to take:

  • Choose a business structure: Decide whether you want to operate as a sole proprietorship, partnership, LLC, or corporation. Each has different legal and tax implications.
  • Register your business name: Ensure your business name is unique and not already in use, then register it with the appropriate state or local agency.
  • Obtain an Employer Identification Number (EIN): If applicable, get an EIN from the IRS for tax purposes, which is also necessary if you plan to hire employees.
  • Apply for necessary permits and licenses: Research and secure any required permits or licenses that are specific to the coffee or food industry in your jurisdiction.
  • Register for state and local taxes: Register with your state's taxation or revenue department to handle sales tax, income tax withholding, and other business-related taxes.
  • Understand employer responsibilities: If you plan to have employees, make sure you comply with labor laws, including workers’ compensation insurance and unemployment insurance.

Resources to help get you started:

Access critical resources designed to support coffee subscription entrepreneurs, featuring market analysis, operational strategies, and tips for successful business expansion:

  • Coffee Subscriptions Market Intelligence Report: Provides detailed insights into consumer preferences and industry trends to help you position your subscription service effectively.
  • Specialty Coffee Association (SCA): Offers comprehensive resources including research, workshops, and webinars on coffee standards, sustainability, and business practices. Visit sca.coffee.
  • Bean Ground & Brewed Newsletter: A monthly newsletter delivering the latest news, trends, and innovations in the coffee subscription space directly to your inbox.
  • Coffee Business Strategies Podcast: Features interviews with successful coffee subscription business owners and experts offering actionable advice on growing your service.
  • Barista Magazine: Contains articles and features on coffee culture, brewing techniques, and the business of coffee, including the subscription model. Check out baristamagazine.com.

5. Acquire necessary licenses and permits for coffee subscription.

Before launching your coffee subscription service, it's crucial to ensure you have all the necessary legal documentation in place. This step helps in legitimizing your business, avoiding any legal issues, and building trust with your customers. Below are the key licenses and permits you need to acquire:

  • Business License: Register for a business license with your local city or county, which allows you to operate legally within your jurisdiction.
  • Sales Tax Permit: If your state or country requires it, obtain a sales tax permit to collect tax on sales from customers.
  • Health Department Permit: Since you're dealing with consumables, your local health department will need to inspect and approve your packing and distribution center.
  • Food Service License: If you're packaging coffee yourself, you may need a food service license, which is issued after ensuring your operations meet food safety standards.
  • Agricultural Permit: If you're importing coffee beans from other countries, check for any agricultural permits required to ensure your imports comply with federal regulations.

What licenses and permits are needed to run a coffee subscription business?

Depending on your specific business model, a variety of licenses and permits may be required to run a coffee subscription business. These include, but are not limited to:-Business license: Depending on the jurisdiction and structure of the business, you may need to get a federal, state, or local business license. -Food and beverage permits: If you are roasting and/or selling coffee, you may need to obtain permits from the health department as well as any other relevant local or state agencies that govern food sales. -Sales and Use Tax Permit: Depending on where your business is based you may need to obtain a Sales and Use Tax Permit in order to register with the appropriate taxing authority. -Specialty Coffee Licenses: If you plan to sell specialty coffees such as fair trade, organic or rare beans, you may need special licensing from the relevant certifying boards.

6. Open a business bank account and secure funding as needed.

Embarking on your coffee subscription business venture requires a solid financial foundation. A dedicated business bank account will streamline your finances, while securing the necessary funding is crucial for covering startup costs and ensuring liquidity. Follow these steps to set your business up for success:

  • Choose a bank that offers favorable terms for small businesses, such as low fees, easy account access, and additional support services.
  • When opening your account, bring your business registration documents, EIN, and personal identification to comply with the bank's requirements.
  • Consider different funding sources like small business loans, lines of credit, investors, or crowdfunding platforms to raise the capital needed for your coffee subscription business.
  • Prepare a solid business plan to present to potential lenders or investors, highlighting the uniqueness of your subscription model and projected financial growth.
  • Keep your personal and business finances separate to maintain clear records for tax purposes and to simplify financial management.
  • Regularly review your business expenses and income through your business bank account to stay on top of your financial health.

7. Set pricing for coffee subscription services.

Setting the right pricing for your coffee subscription service is crucial for attracting and retaining customers while ensuring profitability. Consider the value you're providing, your costs, and your audience's willingness to pay. Follow these guidelines to establish a competitive and fair pricing strategy:

  • Calculate your costs: Factor in the cost of coffee beans, packaging, shipping, and any additional expenses to ensure you're covering costs and making a profit.
  • Analyze the competition: Research competitor pricing to understand the market rate and position your service accordingly, whether it's premium or budget-friendly.
  • Offer tiered pricing: Create different subscription levels based on frequency, quantity, or exclusivity of the coffee to cater to diverse customer needs and budgets.
  • Consider value-based pricing: Price your service based on the perceived value to the customer, which may include convenience, quality, or exclusivity.
  • Include shipping costs: Decide whether to incorporate shipping into the subscription price or charge separately, but be transparent with customers.
  • Provide discounts for longer commitments: Encourage longer subscription terms by offering discounts for extended commitments, improving customer retention.
  • Regularly review and adjust: Monitor your costs, customer feedback, and market trends to adjust pricing as needed to remain competitive and profitable.

What does it cost to start a Coffee Subscription business?

Initiating a coffee subscription business can involve substantial financial commitment, the scale of which is significantly influenced by factors such as geographical location, market dynamics, and operational expenses, among others. Nonetheless, our extensive research and hands-on experience have revealed an estimated starting cost of approximately $18000 for launching such an business. Please note, not all of these costs may be necessary to start up your coffee subscription business.

8. Acquire coffee subscription equipment and supplies.

Embarking on your journey to provide coffee lovers with their regular fix can be exciting and rewarding. Ensuring you have the right equipment and supplies is crucial for delivering quality and consistency to your subscribers. Consider the following essentials for your coffee subscription business:

  • Coffee Beans: Source high-quality, fresh beans from reputable suppliers, and consider offering a variety of blends and single-origin options.
  • Grinder: Invest in a commercial-grade grinder to provide customers with the freshest grounds possible, or offer whole beans if preferred.
  • Packaging: Choose airtight, resealable bags or containers that preserve freshness and are suitable for shipping.
  • Labeling Machine: A labeling machine for custom branding and providing information like roast date, origin, and tasting notes.
  • Scale: Precision scales to ensure accurate and consistent bagging of coffee.
  • Sealer: A heat sealer to securely seal bags and prevent exposure to air.
  • Shipping Materials: Durable boxes, cushioning materials, and custom branding for safe and appealing delivery.
  • Subscription Management Software: Software to manage orders, subscriptions, payments, and customer communication effectively.

List of Software, Tools and Supplies Needed to Start a Coffee Subscription Business:

  • Software: Accounting software, ecommerce platform, customer relationship management system, inventory management software.
  • Tools: Coffee subscription website, payment processing system, marketing automation tools.
  • Supplies: Coffee beans, grinders, cups, filters, flavorings, packaging materials.

9. Obtain business insurance for coffee subscription, if required.

Before launching a coffee subscription business, it's crucial to manage risks by obtaining the right insurance coverage. Business insurance helps protect your investment, covers liabilities, and ensures peace of mind for both you and your customers. Here are some steps to help you secure the necessary insurance:

  • Assess Your Risks: Evaluate potential risks associated with your coffee subscription business, such as property damage, customer lawsuits, or employee injury.
  • Research Insurance Types: Look into various types of insurance, including general liability, product liability, commercial property, and business interruption insurance.
  • Consult with Professionals: Speak with an insurance agent or broker who has experience with subscription services and can provide tailored advice for your specific needs.
  • Compare Quotes: Obtain quotes from multiple insurance providers to find the best coverage at a competitive price.
  • Review Policy Details: Carefully read the terms of each policy, paying attention to coverage limits, deductibles, and exclusions.
  • Stay Compliant: Ensure your chosen policy meets any legal requirements for businesses in your location and industry.
  • Regularly Reassess: As your business grows, regularly review and update your insurance coverage to protect against new risks.

10. Begin marketing your coffee subscription services.

Marketing your coffee subscription service is crucial for attracting customers and growing your business. It's time to showcase your unique offerings and brand story to the world. Implement effective marketing strategies to make your subscription service a go-to choice for coffee enthusiasts. Here are some tips to get you started:

  • Build an Engaging Website: Ensure your website is visually appealing, easy to navigate, and provides a seamless subscription process.
  • Utilize Social Media: Create engaging content on platforms like Instagram, Facebook, and Twitter to reach potential subscribers and build a community.
  • Email Marketing: Keep in touch with your subscribers through regular newsletters, offering discounts, and updates about new products or services.
  • Influencer Partnerships: Collaborate with coffee influencers who can authentically promote your subscription service to their followers.
  • Content Marketing: Start a blog or a YouTube channel with valuable content about coffee culture, brewing tips, and behind-the-scenes looks at your sourcing process.
  • Referral Programs: Encourage word-of-mouth marketing by offering incentives for customers who refer friends and family to your service.
  • Local Events and Pop-ups: Participate in community events or set up pop-up shops to raise awareness and allow people to sample your coffee.
  • Ads and Promotions: Invest in targeted ads on social media and Google to reach potential subscribers who are searching for coffee subscriptions.

What licenses and permits are needed to run a coffee subscription business?

  • Software: Accounting software, ecommerce platform, customer relationship management system, inventory management software.
  • Tools: Coffee subscription website, payment processing system, marketing automation tools.
  • Supplies: Coffee beans, grinders, cups, filters, flavorings, packaging materials.

11. Expand your coffee subscription business.

Now that your coffee subscription business is up and running, it's time to consider expansion to reach more coffee lovers and grow your brand. Here are several strategies to help you scale up effectively and ensure the continued success of your venture.

  • Explore New Markets: Look beyond your current customer base and investigate new demographics and geographic areas that could enjoy your coffee subscription service.
  • Collaborate with Influencers: Partner with social media influencers and coffee bloggers to tap into their followers and gain wider exposure for your brand.
  • Enhance Product Range: Diversify your offerings with a variety of blends, single-origin coffees, and limited edition flavors to attract a broader audience.
  • Invest in Marketing: Boost your digital marketing efforts, utilizing SEO, content marketing, and paid advertising to increase online visibility and attract new subscribers.
  • Referral Programs: Encourage word-of-mouth promotion by implementing a referral program that rewards current subscribers for bringing in new customers.
  • Corporate Partnerships: Secure corporate clients by offering office subscriptions, which can lead to bulk orders and a steady revenue stream.
  • Customer Experience: Continuously seek feedback and improve the customer experience to ensure high retention rates and positive reviews.
  • Optimize Operations: Streamline your fulfillment and delivery processes to handle increased volume without compromising quality or efficiency.